Main Aazaad Hoon

Like most of my blog, the title of this article is also inspired by Bollywood. Bollywood and Finance has always attracted me as there seems to be a lot of commonality in them. Both of them have lots of action, drama, hasi mazaak(Highs) and rona dhona (Lows) etc. Well as it is said that most of the stories of Bollywood movies are inspired from our day to day life, I thought of writing an article inspired by a famous movie title. Coming back to the point, through this article I would like to share how an individual can be free from financial trouble and that’s when they can say “Main Azaad Hoon”. Here we go:

The First thing one should do is to take a Life Insurance policy. This is the simplest and most economical way to ensure that your family future is secured and that they are free from any kind of financial trouble, even when you are not around. The number of policies don’t matter; what matters is the amount of insurance one has opted for. Well, there is no definite amount but as per thumb rule one should have at least 10-12 times of his/her annual income so that one’s family can continue to maintain the same life style. Having a life insurance becomes even more important when you have liabilities like a home loan or a business loan because here the money involved is very huge and can take away your lifetime savings. I won’t talk much about having a life insurance as I have already shared in my previous article the need and importance of it.

Second is to have a health insurance. Do you know that hospitalisation for ONLY 1 disease can take away our years of savings? Sharing few numbers as food for thought:

• One of the fastest growing illness in India is Cancer and the treatment cost can be anywhere between INR 8-10 lakhs
• In India, 1 out of 10 people suffer from some chronic kidney disorder. A kidney transplant costs around Rs. 7 lakhs whereas dialysis can cost you anywhere between INR 18,000-20,000 per session
• 25% of deaths in the age group of 25-69 are because of heart disease. The treatment cost here can be anywhere between INR 5-7 lakhs
• Hospitalisation cost in case of Covid is anywhere between INR 2-3 lakhs per person. The biggest problem here is that in case of Covid, multiple family members can get infected and may need hospitalisation. This will increase the cost highly.

Don’t think of the annual premium as expense but it is a small amount for peace of mind and safety of ourself and our family members.

In case you don’t have a health insurance, you should apply for one immediately and in case you have a health insurance, ensure that its good enough to cover the hospitalisation cost. If you already have insurance and the cover is not enough, you can opt for a “Top Up” plan instead of applying for new insurance policy. Top Up plans can provide a very high cover at a very low cost. A floater “Top Up” plan of INR 10 lakhs should not cost you more than INR 5000-6000 on an annual basis.

Third is to keep aside a sum of money which can take care of your day to day expense for next 3-4 months. This can be kept in bank Fixed deposit or in a Liquid fund / Arbitrage mutual fund.

It’s when one does all the above 3 actions i.e. Life Insurance, Health Insurance and creation of an Emergency Fund, that one is truly free and can proudly say “ Main Azaad hoon”. One can then start investing in which ever asset class suitable as per one’s risk profile. It can be Equity, Debt, Gold, Hybrid etc.

“A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.” – Suze Orman

Main Hoon Na!!

Yes! This is one of the famous movies in Bollywood but that is not what I am not referring to. I am referring to what we say, whenever our kids / friends /parents / siblings are in trouble. This is one of the things, I like about our culture and values. We go all out to help our friends and families even if its outside our reach. We provide them not only what they want but also what we feel they deserve. However, one thing that we often forget in the hustle and bustle all the hassles of life is, what will happen to our family when we are not around? We can and we do whatever possible to ensure that our family gets what ever they need and that no trouble comes to them. Many a times we so much love to live in the present that we forget about the future. Our family deserves not only our love, affection and trust but also financial freedom, especially when we are not around.

Apart from what ever we do for our family, our first and utmost responsibility should be to safeguard their future. Obviously, we can’t change the destiny but we can at least ensure that they don’t have to fight with destiny along with struggling for money and the simplest way to do this is to simplify your finances. A first step towards this financial freedom can be taking up a term plan. I am sure most of you have heard about term plans and I hope all of you have also bought it. For those who are not aware of term plans, this is an insurance product which is available at a very low cost and is the easiest way to ensure that your family has a contented future when you are not around. For example, term insurance is available at less than Rs 600 per month for a cover of Rs 1 Cr.

It provides not only financial stability to your family, but can also come in handy to repay any debt, home loans, etc. During your lifetime they can be helpful to cover disability or critical illnesses, too. Though I am not a big fan of recommending insurance for saving tax but ’yes’, it does give you tax benefit under section 80C.

It doesn’t matter even if you are covered under group insurance policy of your company; you should still ensure that you have taken an individual policy. Again, it doesn’t matter how many policies you have taken; what matters is the sum you are insured for. Once more, it doesn’t matter which company you choose; whether you buy an insurance policy or not matters.

We all know and understand that we need insurance cover but many of us postpone it for unknown reasons. Events like Corona only reiterate the fact that we all should be covered for any contingencies as life is uncertain.

When buying an insurance, there are few things that you should remember:

• Disclose everything about your lifestyle while applying for insurance (hiding facts to save few hundred rupees can be expensive for your family if your claim is rejected).
• Ensure that your life cover is minimum 10-12 times (ideally it should be 20 times) of your current annual income. This will ensure enough money for your family.
• Buy insurance from a company you trust.
• Your family should be aware about your insurance. This is “Very Important”. All the above actions and decisions will be of no use if they are not aware about it. (Do you know that the LIC of India alone has more than Rs. 11,000 Cr of unclaimed money ?)

Always remember It’s not about what you need. It’s about what your family needs if you aren’t there. You don’t buy life insurance because you are going to die, but because those you love are going to live